Federal Register / Vol. 72, No. 73 / Tuesday, April 17, 2007 / Notices 19225 

14 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying at 

the principal office of NASD. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to the File 

Number SR–NASD–2007–022 and 

should be submitted on or before May 

8, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–7222 Filed 4–16–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55615; File No. SR–NYSE–

2007–34] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Amend NYSE Rule 80A.40(b) To 

Update the Definition of ‘‘Program 

Trading,’’ To Substitute Simplified 

Audit Trail Requirements, and To Make 

Conforming Amendments to NYSE 

Rule 410B 

April 11, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 22, 

2007, the New York Stock Exchange 

LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been prepared substantially by 

NYSE. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NYSE proposes to amend NYSE Rule 

80A.40(b) to update the definition of 

‘‘program trading’’ by eliminating the 

pre-determined minimum dollar value 

requirement for trading strategies that 

involve the related purchase or sale of 

a ‘‘basket’’ or group of 15 or more 

stocks, to substitute simplified audit 

trail requirements, and to make 

conforming amendments to Rule 410B. 

The text of the proposed rule change is 

available at NYSE, http:// 

www.nyse.com, and the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NYSE included statements concerning 

the purpose of and basis for the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. NYSE 

has prepared summaries, set forth in 

Sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

In order to improve the reporting and 

monitoring of program trading by the 

Exchange, NYSE proposes to clarify 

what constitutes program trading and to 

streamline the process for entering and 

identifying program trades. To 

accomplish this, the Exchange is 

proposes (i) to amend NYSE Rule 

80A.40 to eliminate the minimum dollar 

value from the definition of program 

trading, and (ii) to substitute simplified 

audit trail requirements in place of the 

more cumbersome reporting 

requirements that currently apply to 

program trading. The proposed 

amendments also include certain 

conforming amendments to NYSE Rule 

410B. In connection with these changes, 

the Exchange also intends to issue 

guidance regarding the definition of a 

‘‘coordinated strategy,’’ as that term is 

used in Rule 80A.40. 

Background. The Exchange adopted 

Rule 80A in the wake of the 1987 

market break to address various 

coordinated professional trading 

strategies, in particular, program trading 

that was using the cash market to take 

advantage of trading in the derivatives 

market. To ensure that the rule would 

encompass the various permutations 

that such trading strategies might take, 

the Exchange defined program trading 

as either index arbitrage or ‘‘any trading 

strategy involving the related purchase 

or sale of a ’basket’ or group of 15 or 

more stocks having a total market value 

of $1 million or more.’’ The monetary 

value was believed at the time to 

capture program trading strategies that 

would be significant in the context of 

the market. Despite a significant 

increase in the size and value of trading 

in the market since 1987, however, this 

monetary component of the definition 

has not been updated since it was 

adopted. 

Proposed Redefinition of Program 

Trading. Given the technical and 

automated nature of the trading 

environment that exists today, the 

Exchange believes that the current 

definition of ‘‘program trading’’ is no 

longer workable, since, among other 

things, it captures certain computerdriven or algorithmic trading strategies 

that are not intended to be program 

trades. At the same time, certain 

strategies that could fairly be classified 

as programs—that is, strategies 

involving 15 or more stocks that are 

intended to be coordinated, but which 

do not meet the monetary threshold—

are not being captured. 

In contrast to 1987, most firms today 

employ algorithmic trading to manage 

and carry out both plain-vanilla 

execution strategies that are not 

intended to be programs, including 

public-customer driven parameter-based 

trading (that is, trading in which the 

customer specifies certain desired 

execution conditions such as timing, 

pricing, quantity, or marketplace 

selection, and the algorithm evaluates 

market information and generates orders 

that best match the specified conditions 

without further human intervention), 

and more complex trading strategies 

that are intended to be programs. The 

Exchange therefore recognizes that not 

all computer-driven trading strategies 

constitute Program Trading. For 

example, if they otherwise lack the 

other definitional characteristics of 

program trading, algorithmic trading, 

volume-weighted average price 

(‘‘VWAP’’) trading, statistical arbitrage, 

and similar computer-driven trading 

strategies may not need to be classified 

or reported as a program simply because 

the strategy is executed through a 

computer model or ‘‘black box.’’

This has led to regulatory confusion; 

indeed, member firms have informed 

the Exchange that in order to ensure full 

compliance with the rule, they feel 

compelled to report computer-driven 

trading strategies that meet the technical 

definition of a program even though 

they are not, in fact, intended as 

program trading. 

To address the issue of the overbroad 

definition of program trading and to 

improve the precision of program trade 

reporting, the Exchange proposes to 

amend the definition of program trading 

under NYSE Rule 80A.40 to eliminate 


sroberts on PROD1PC70 with NOTICES
19226 Federal Register / Vol. 72, No. 73 / Tuesday, April 17, 2007 / Notices 

3 15 U.S.C. 78f(b)(5). 

the requirement that program trades 

must have a combined value of $1 

million or more. The Exchange believes 

that the minimum dollar value currently 

contained in Rule 80A.40 establishes an 

arbitrary and artificial bar for 

determining whether a coordinated 

strategy constitutes program trading. In 

the absence of the dollar threshold, the 

Exchange proposes assessing whether a 

trading program constitutes a 

coordinated strategy examining its 

attributes rather than relying on such an 

arbitrary limitation. 

To assist firms in determining 

whether a particular set of trades 

constitutes a ‘‘program,’’ the Exchange 

intends to issue guidance to member 

organizations regarding factors to 

consider in determining whether a 

trading strategy is ‘‘coordinated.’’ This 

guidance will focus on how the primary 

investment objective of the trading, as 

well as the linkage or dependency 

between and among simultaneous (or 

substantially simultaneous) trades in 

different securities, relate to the 

investment objective. As described more 

fully below, under the revised rule, the 

Exchange would consider any execution 

of 15 or more stocks that is entered as 

part of a single investment strategy 

(including liquidation, rebalancing, or 

realignment of a basket/portfolio) with 

the intention to execute all or most of 

the stocks to be a ‘‘coordinated 

strategy.’’

‘‘Coordinated strategies’’ would 

include any purchase or sale of 15 or 

more stocks that is (i) coordinated 

pursuant to a broader investment 

strategy such as economic, financial, or 

fundamental characteristics (such as a 

particular industry, sector, or industry) 

or market activity, and (ii) where the 

execution of the securities within the 

portfolio is linked, as opposed to being 

merely coincidental single stock 

definitions. A coordinated strategy 

would include a portfolio or basket 

strategy of 15 or more stocks wherein 

each stock execution is dependent upon 

the execution of all or most of the 

securities within the portfolio or basket. 

And, as before, program trading would 

also include all index arbitrage trading. 

Accordingly, any strategy that attempts 

to capture identified mispricings 

between an S&P 500 component 

security and its related future as the 

filters for buying or selling such stock, 

regardless of the number of stocks 

involved, is a program. 

As noted above, not all computerdriven trading strategies would be 

defined as program trading. For 

example, portfolio VWAP transactions 

that attempt to provide a customer with 

an average price for the purchase or sale 

of stocks would not necessarily be a 

program. For VWAP trading to 

constitute a program, the trading would 

have to involve a portfolio or basket of 

15 or more stocks as part of a 

coordinated strategy. 

In addition, pairs trading, in which 

stocks are put into pairs by fundamental 

or market-based similarities and traded 

versus each other, would not necessarily 

be program trading. For pairs trading to 

fall within the program trading 

definition, the engine or algorithm used 

for execution of the selected pairs 

would have to consist of a group of 

related stocks that would be defined as 

a program, e.g., an automative ‘‘pairs’’

algorithm that typically trades more 

than 15 different automotive stocks. 

Streamlining Reporting of Program 

Trades. The Exchange is also proposing 

to streamline the reporting process that 

member organizations must follow 

when reporting program trading. Since 

1988, the Exchange has required that 

member firms report program trading 

activities by the close of business on the 

second business day following the trade 

date on a Daily Program Trading Report 

(‘‘DPTR’’). Member firms currently file 

their DPTRs via an electronic filing 

platform operated by the Exchange. 

Because the DPTR is created after the 

trades have been executed, rather than 

in connection with the entry of orders 

at issue, the DPTR is potentially less 

accurate than determining program 

trading information based on audit trail 

information, which captures trading 

information at the time of execution. 

Moreover, because all information 

reported on the DPTR is already 

available to the Exchange via audit trail 

information, the DPTR has become 

redundant. Accordingly, to streamline 

the reporting process, the Exchange is 

proposing to eliminate the DPTR 

requirement, and to rely instead on 

audit trail information to determine 

whether firms are engaging in program 

trading. To assist in identifying program 

trading, the Exchange is redefining two 

of the eight existing program trading 

related audit trail account types so that 

member firms can mark the specific 

program trading strategy at the time of 

order entry and execution, rather than 

waiting to report via the DPTR. 

The Exchange does not believe that 

the proposed changes to Rules 80A and 

410B would in any way compromise its 

existing surveillances, or impair the 

ability to conduct additional 

surveillances, as necessary. To the 

contrary, the Exchange believes that the 

proposed changes to the definition of 

program trading and the revised audit 

trail information will lead to more 

focused surveillances for assessing 

whether member organizations engage 

in program trading. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 3 that an Exchange 

have rules that are designed to promote 

just and equitable principles of trade, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

A. By order approve such proposed 

rule change, or 

B. Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

No. SR–NYSE–2007–34 on the subject 

line. 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 72, No. 73 / Tuesday, April 17, 2007 / Notices 19227 

4 17 CFR 200.30–3(a)(12). 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2007–34. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of NYSE. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NYSE–2007–34 and should 

be submitted on or before May 8, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.4

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–7224 Filed 4–16–07; 8:45 am] 

BILLING CODE 8010–01–P 

DEPARTMENT OF STATE 

[Public Notice 5777] 

Determination and Waiver of Section 

517(a) of the Foreign Operations, 

Export Financing, and Related 

Programs Appropriations Act (2006) 

(Pub. L. 109–102), as Carried Forward 

Under the Revised Continuing 

Appropriations Resolution, 2007 (Pub. 

L. 110–5), Relating to Assistance for 

the Independent States of the Former 

Soviet Union 

Pursuant to the authority vested in me 

as Deputy Secretary of State, including 

by Section 517(a) of the Foreign 

Operations, Export Financing, and 

Related Programs Appropriations Act 

(2006) (Pub. L. 109–102), as Carried 

Forward Under the Revised Continuing 

Appropriations Resolution, 2007 (Pub. 

L. 110–5), Executive Order 13118 of 

March 31, 1999, and State Department 

Delegation of Authority No. 245 of April 

23, 2001, I hereby determine that it is in 

the national security interest of the 

United States to make available funds 

appropriated under the heading 

‘‘Assistance for the Independent States 

of the Former Soviet Union’’ in Title II 

of the FOAA, as carried forward under 

the CR, without regard to the restriction 

in that section. 

This determination shall be reported 

to the Congress promptly and published 

in the Federal Register. 

Dated: April 4, 2007. 

John D. Negroponte, 

Deputy Secretary of State, Department of 

State. 

[FR Doc. E7–7273 Filed 4–16–07; 8:45 am] 

BILLING CODE 4710–23–P 

DEPARTMENT OF STATE 

[Public Notice 5758] 

Defense Trade Advisory Group; Notice 

of Open Meeting 

AGENCY: Department of State. 

ACTION: Notice. 

SUMMARY: The Defense Trade Advisory 

Group (DTAG) will meet in open 

session from 9 a.m. to 12 noon on 

Thursday, September 20, 2007, in the 

East Auditorium at the U.S. Department 

of State, Harry S. Truman Building, 

Washington, DC. Entry and registration 

will begin at 8:15 a.m. Please use the 

building entrance located at 21st Street, 

NW., Washington, DC between C&D 

Streets. The membership of this 

advisory committee consists of private 

sector defense trade specialists, 

appointed by the Assistant Secretary of 

State for Political-Military Affairs, who 

advise the Department on policies, 

regulations, and technical issues 

affecting defense trade. The purpose of 

the meeting will be to discuss current 

defense trade issues and topics for 

further study. 

Members of the public may attend 

this open session and will be permitted 

to participate in the discussion in 

accordance with the Chairman’s 

instructions. They may also, if they 

wish, submit a brief statement to the 

committee in writing. 

As access to the Department of State 

facilities is controlled, persons wishing 

to attend the meeting must notify the 

DTAG Executive Secretariat by COB 

Thursday, September 13, 2007. If 

notified after this date, the DTAG 

Secretariat cannot guarantee that State’s 

Bureau of Diplomatic Security can 

complete the necessary processing 

required to attend the September 20th 

plenary. 

Each non-member observer or DTAG 

member that wishes to attend this 

plenary session should provide: His/her 

name; company or organizational 

affiliation; phone number; date of birth; 

and identifying data such as driver’s 

license number, U.S. Government ID, or 

U.S. Military ID, to the DTAG 

Secretariat contact person, Nicholas 

Memos, via e-mail at 

MemosNI@state.gov. A RSVP list will be 

provided to Diplomatic Security. One of 

the following forms of valid photo 

identification will be required for 

admission: U.S. driver’s license, 

passport, U.S. Government ID, or other 

valid photo ID. 

FOR FURTHER INFORMATION CONTACT: For 

additional information, contact Nicholas 

Memos, PM/DDTC, SA–1, 12th Floor, 

Directorate of Defense Trade Controls, 

Bureau of Political-Military Affairs, U.S. 

Department of State, Washington, DC 

20522–0112; telephone (202) 663–2804; 

fax (202) 663–261–8199; or e-mail 

MemosNI@state.gov. 

Dated: April 10, 2007. 

Robert W. Maggi, 

Executive Secretary, Defense Trade Advisory 

Group, Department of State. 

[FR Doc. E7–7274 Filed 4–16–07; 8:45 am] 

BILLING CODE 4710–25–P 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary 

Aviation Proceedings, Agreements 

Filed the Week Ending April 6, 2007 

The following Agreements were filed 

with the Department of Transportation 

under the Sections 412 and 414 of the 

Federal Aviation Act, as amended (49 

U.S.C. 1383 and 1384) and procedures 

governing proceedings to enforce these 

provisions. Answers may be filed within 

21 days after the filing of the 

application. 

Docket Number: OST–2007–27825. 

Date Filed: April 5, 2007. 

Parties: Members of the International 

Air Transport Association. 

Subject: Mail Vote 532—Resolution 

010n, TC3 Special Passenger Amending 

Resolution Between Japan and China 

(excluding Hong SAR and Macao SAR) 

(Memo 1076). 


sroberts on PROD1PC70 with NOTICES